The fact of the matter is that, even trying to set aside our own Australian bias, Mullin’s article is a nasty piece, replete with snide insinuations giving the overall impression that CSIRO is some sort of patent troll with diplomatic connections, seeking to extract a ‘tax’ on behalf of a foreign government, from hard-working US companies and consumers, on the basis of a patent of dubious merit.
Since every part of this characterisation of CSIRO’s position is demonstrably false, we can only conclude that Mullin’s piece is an appallingly poor example of journalism. And we are not alone in this view. The article received so many negative comments that Mullin felt compelled to post a ‘justification’ addressing the criticisms (Responses and clarifications on the CSIRO patent lawsuits).
Of course, Mullin does not concede that he might have been unfair, or got anything wrong. But we think he was, and he did. Here are our top five reasons – in no particular order – why Mullin’s article, and his subsequent ‘justification’, are deserving of strong criticism.
1. TWO WRONGS DON’T MAKE A RIGHTMullin seems particularly upset about the fact that the CSIRO, and the Australian Minister for Tertiary Education, Skills Science and Research, have issued statements to the press praising the quality and significance of the Australian research behind the WLAN patent.
It is hardly news that politicians like to put a positive spin on things. Therefore, it should come as a surprise to nobody that an Australian minister would wish to bask in the success of Australian scientists. Hyperbole is par for the course, and criticism of politicians and management who may have overstated their case is perfectly legitimate.
But this has nothing to do with the validity of the patent, the legitimacy of CSIRO’s legal claims, or the reasonableness of the settlement terms. As such it is largely irrelevant to the main thrust of Mullins’s argument.
Still, this does not prevent him from raising a little nationalist fervour of his own. It starts with the provocative title of his article, complete with scare-quotes around the phrase ‘invented WiFi’. The first word of the article is ‘US’, leading the opening sentences:
US consumers will be making a multimillion dollar donation to an Australian government agency in the near future, whether they like it or not. The great majority won't even know about it—the fee will be hidden within the cost of a huge array of tech products.
There is a strong implication in what follows-on that CSIRO is some kind of shadowy arm of the Australian government:
Haven't heard of CSIRO? It's no mistake. While the organization has been eager to brag to the Australian press about its big-money exploits in US courts, CSIRO has been circumspect about its lawsuits in the US. When it began its litigation campaign in 2005, CSIRO considered filing under the name "Government of Australia" but decided that would be "too provocative," according to a cable about the issue published by WikiLeaks.
Setting aside for one moment the fact that privately-held organisations do not generally have to worry about their confidential litigation strategy discussions being revealed by WikiLeaks, there is another part of that cable which Mullin conveniently does not quote:
CSIRO is independent under a 1949 law, as amended in 2007. Because it is a government entity, the Minister for Science could order CSIRO to do something, but such instances are relatively rare. The last "ministerial direction" to CSIRO (i.e., a direct order) was in 2001.
[CSIRO Business Services Chief of Staff Jack] Steele noted that the difference in the size of the U.S. and Australian markets demands a different approach to licensing inventions derived from federal-government backed research entities. Most of the benefits of a CSIRO-sponsored invention will actually accrue in the United States (population 300 million) and elsewhere rather than in Australia (20 million), so licensing patents rather than making them freely available is a way of capturing some of the benefits back for the Australian taxpayer.
Mullin’s objections to the ‘national pride’ angle are pure hypocrisy. It is a case of ‘when I do it, it’s patriotism; when you do it, it’s nationalism; when they do it, it’s fundamentalism.’ Why someone from a nation with over ten times the population of Australia, which is constantly extolling its virtues to the world, should feel quite so outraged by a little bit of foreign political spin is something of a mystery.
2. RADIATA DID NOT FAILMullin has this to say of CSIRO’s initial attempt to commercialise its WLAN technology via licensing to startup company Radiata:
The closest thing CSIRO ever had to a commercial product was a "demonstration chipset" produced by Radiata, an Australian wireless company formed by ex-CSIRO employees. Radiata was acquired by Cisco in 2000 for $295 million but turned out to be a dot-com era boondoggle. Its products weren't successful. Cisco ultimately took a large write-down on the value of the Radiata acquisition.
In fact, as anybody who has ever been involved in a tech startup knows (and we have worked for two of them), Radiata was, by any measure, a great success.
As we wrote in our earlier article, little more than one year prior to the Cisco acquisition, investors valued Radiata at around one tenth of the eventual purchase price. The difference was that in the intervening period Radiata turned its intellectual property into an actual working chip operating at 54 Mb/s, i.e. the same rate that many WiFi networks achieve in practice to this day. For the Radiata owners and investors, a US$295 million sale to Cisco Systems represented a successful exit.
Cisco – like the majority of other networking companies – was hit hard by the massive telecoms crash of 2001. The repercussions of this market collapse are with us to this day. We now have Alcatel-Lucent, instead of Alcatel and Lucent, Nokia-Siemens, instead of Nokia and Siemens, telecoms pioneer Marconi is no more, acquired and absorbed by Ericsson and, most spectacularly of all, Canadian networking giant Nortel never recovered, declaring bankruptcy in 2009, and famously auctioning a large portion of its patent portfolio (including all of its wireless patents) in 2011.
So in 2001 Cisco had to make a number of tough business decisions, and the Radiata write-down was just one of them. Radiata was a victim of history, not of any lack of technical merit. There just was not – yet – a sufficient market for its technology. That was to come a couple of years later.
3. RESEARCH NPE’S ARE NOT ‘TROLLS’Nowhere in his article does Mullin actually call CSIRO a patent troll. But he implies it fairly strongly:
A few years after the Radiata venture, CSIRO officials knew they had no footing in the actual market of wireless products. Yet, they recognized there was still an area they could pursue to get a second chance to make money off their invention: threatening companies with patent lawsuits in far-off US courts. It was a practice rapidly becoming an industry of its own. In 2003 and 2004, the organization sent letters to 28 different wireless companies asking for money but was rebuffed by all of them. In 2005, CSIRO picked a "test case" against a small Japanese company called Buffalo Technology. Buffalo wasn't like US tech heavyweights, already used to dealing with a barrage of patent litigation. Instead, Buffalo stood out for its impertinence. CSIRO official Nigel Poole said the company had practically "picked itself" as the first victim by accusing CSIRO of being "swindlers." Even if other companies had thought it, Buffalo said it.
The case was filed in the Eastern District of Texas. Advantage: patent-holders. Buffalo asked to change venues, but Judge Leonard Davis (who has overseen all the CSIRO lawsuits) wouldn't allow a move. The Buffalo case didn't even get to a jury. Davis ruled on summary judgment that the company had infringed CSIRO's patents.
This is disingenuous in the extreme. As Mullin is surely aware, an organisation like CSIRO will never have its own product in the marketplace. Research institutions will seek to commercialise their inventions where possible via various forms of technology transfer arrangement. This may involve licensing the technology to a startup (like Radiata), spinning-off a company to which the IP is assigned, and/or licensing or selling the IP to one or more established companies in the market (like Cisco).
This is exactly what CSIRO did, or attempted to do in good faith, on all three counts.
Research organisations are natural ‘non-practising entities’ (NPE’s). But since they develop technology themselves they are – unlike true patent ‘trolls’ – net contributors to the store of human knowledge and capability. To give a US-based example, according to its 2011FY Technology Transfer Report, the University of California system:
- expended nearly US$5 billion in research funds;
- generated 1,581 invention disclosures;
- filed 1,285 patent applications;
- received 343 US patents and 364 foreign patents;
- had 1,477 utility patent licenses active;
- received US$202.4 million in licensing income; and
- formed 58 new startup companies.
4. THE CSIRO WLAN PATENT IS VALIDNotwithstanding the fact the CSIRO WLAN patent passed examination at the USPTO, and survived three re-examination requests (the control numbers are 90/010,367, 90/010,950 and 90/011,331, if you wish to look them up via the USPTO Public PAIR system), Mullin’s article pushes the defendants’ line that CSIRO did not invent any of the individual elements of the invention, and that the claimed combination must be obvious.
Of course, most inventions are combinations of known elements. That tends to be, for the most part, how advances in technology are made. But this is not enough by itself to establish obviousness under the patent laws.
Mullin is correct that defendants settle litigation all the time for practical reasons, and that this is not proof of the validity of the applicants’ claims. However, he suggests in his ‘justification’ that some of the world’s biggest tech companies would settle for tens of millions of dollars each, rather than proceed with a $4-5 million patent case, despite believing the patent to be invalid. That seems pretty implausible, when you do the sums!
But it really does not matter, because the bottom line is this: under 35 USC 282 a US patent is presumed valid. And, as recently confirmed by the Supreme Court in Microsoft v i4i Limited Partnership, invalidity must be shown by ‘clear and convincing evidence’. Rightly or wrongly, that is the law which applies to everyone. To sit on the sidelines passing judgement on the validity of issued US patents is therefore as futile an exercise as tilting at windmills.
5. THE IEEE STANDARDS ISSUE IS A RED HERRINGMullin refers in his article, and in his ‘justification’, to the IEEE standards-setting process which resulted in the 802.11a/g standards to which the CSIRO WLAN patent is essential.
He says in the main article that:
The IEEE considered many proposals, ultimately adopting a proposal by Lucent and NTT for 802.11a. Hitoshi Takanashi, CEO of NTT, testified that not only did his company not steal CSIRO's idea back in 1997, he'd never even heard of the organization. Stephen Saltzman, an Intel Capital official testifying at trial, said that outside of Radiata and its ex-CSIRO employees, engineers didn't take the idea of a brand-new WiFi patent describing CSIRO's techniques that seriously.
Both of these points are irrelevant. It does not matter that a Japanese company had not heard of CSIRO in 1997, or that it ultimately developed a similar solution independently. Unlike copyright infringement, the presence or absence of actual copying is not an element of patent infringement.
In the ‘justification’ piece Mullin acknowledges that CSIRO notified the IEEE committee of its patent, but says:
That doesn't change the fact that CSIRO was not substantively involved in the creation of the 802.11 standards.
Anyone interested in getting into this further should take a look at the testimony and cross-examination of Albert Petrick and Matthew Shoemake, both of whom were extensively involved in the IEEE standard-setting process. They testified at the 2009 trial; as did Hitoshi Takanashi, who submitted the proposal for 802.11a that was eventually adopted.
The testimony confirms Mullin’s claim – neither CSIRO nor Radiata submitted proposals to the IEEE 802.11 standards committee. But this is a complete red herring. No company or organisation is obliged to push its own technology to any standard-setting body. Conversely, no standards committee is required to reject a proposal merely because it may be covered by IP rights owned by a non-participating party.
There was nothing untoward about the way in which the IEEE 802.11 standards were set, or in CSIRO’s conduct in relation to that process. However, if Mullin thinks there is a problem with this, he might want to take a closer look at Apple’s conduct in relation to the W3C ‘touch events’ standard, as explained by his Ars Technica colleague Peter Bright.
CONCLUSIONNothing that Mullin might say now will alter the fact that his original article was a tawdry piece, which relied on base appeals to US nationalism and a general opposition to technology patents to support a dishonest, biased attack on CSIRO.
In the end, if CSIRO’s claims that its licenses now cover 90% of all WiFi devices produced are correct, the amount it has received is not at all unreasonable. Under half a billion dollars in exchange of 90% of over three billion devices sold to date amounts to around 18 cents royalty for each device. Of course this is far less than the $4 figure that CSIRO reportedly requested initially, but nobody familiar with the concept of a ‘license negotiation’ will be surprised by this.
That the patent has survived, and that CSIRO stood its ground despite the wealth and power of its opponents, and the nastiness of its critics, is something of which it can be duly proud.